No, there is no word missing.

Explanation: The sentence you cited,

(A) Damit wächst in Libyen die Gefahr einer direkten Konfrontation türkischer und ägyptischer Streitkräfte.

boils down to the same semantics as your altered version,

(B) Damit wächst in Libyen die Gefahr einer direkten Konfrontation zwischen türkischer und ägyptischer Streitkräfte.

However, the latter is a slightly different sentence in that it makes something explicit that is left implicit in the former.

In (B), the constellation of parties involved in the conflict is explicitly stated. (B) says explicitly that Turkish and Egyptian armed forces may fight against each other.

Even if we assume that this meaning can only be expressed with "zwischen" (of which I'm not completely convinced, due to the low number of examples e.g. on Duden), the conclusion that "zwischen" is missing in (A) does not follow:

(A) does not explicitly say who may fight whom (although readers will trivially figure this out from context). (A) merely says that there may be confrontations in which both Turkish and Egyptian armed forces are involved. For this statement, using just a genitive is totally appropriate. Note that this is not an instance of meaning 1 from Duden. It is simply a usage of the unspecific noun "Konfrontation" that is then further specified with genitive attributes.

According to Duden there are two possibilities with slightly different meanings:

1) Gegenüberstellung nicht übereinstimmender Personen, Meinungen, Sachverhalte

A comparison or confrontation between different persons, opinions or circumstances.

Examples include:

die unerwartete Konfrontation des Angeklagten mit den Zeugen verfehlte nicht ihre Wirkung

the unexpected confrontation of the defendent with the witness achieved the desired effect.

die Konfrontation von Geschichte und Gegenwart

the confrontation of history/past and present

Please note: This usage requires the genitive without a preposition and the dative after von.

2) Auseinandersetzung zwischen Gegnern

Confrontation between opponents

Examples include:

es kam zu einer Konfrontation zwischen Demonstranten und der Polizei

a confrontation between demonstrants and police emerged

Please note: this requires the objects after zwischen to be in dative.

Conclusion:

Technically speaking you are correct, they should have used zwischen. However, even I as a native speaker wasn't aware of that before I looked up. So I wouldn't blame the authors too much.